By acquiring a Cincinnati outsourcer, Harland Financial Solutions Inc. would gain scale to help it compete in the consolidating market for core processing, where the four largest providers have been gobbling up rivals.
Intrieve Corp. would also jump-start Harland's plans to offer core processing services to banks through a service bureau and provide an entry into check imaging and other item processing.
Currently the Orlando unit of the Atlanta check printer John H. Harland Co. provides core and item processing to credit unions but not to banks. Harland Financial announced the deal Tuesday.
An analyst said that by acquiring Intrieve, Harland, the No. 6 provider of core processing software and services, would supplant the New York outsourcer Bisys Group Inc. as No. 5.
Intrieve claims more than 800 community banks and thrifts as clients, including 150 that outsource their core processing of deposit and loan accounts to it. Harland has been relying more on its technology unit as its core check-printing business has declined.
Harland said it expects the deal to close within 60 days; it is subject to approval by Intrieve's shareholders, most of which are companies on the Intrieve client list. Harland would not disclose the price it agreed to pay, and an executive would not discuss the potential impact on earnings ahead of the company's quarterly conference call with analysts, scheduled for today.
John O'Malley, Harland Financial's president, said it has a data center in Des Moines that provides services to hundreds of credit unions. But its bank software for core processing is available only for in-house installation.
"We need to have our own brick-and-mortar" to round out offerings, Mr. O'Malley said in an interview Tuesday.
Harland has been developing an outsourcing capability, but "it takes some time to build a data center and to get that first customer and second customer," Mr. O'Malley said. Intrieve would solve those problems, he said. "Straight out, it brings us right into the bank core-processing outsourcing market."
The acquisition would also give Harland more products to offer its 1,100 core processing clients and its 5,000 clients for other services. In addition to item processing with digital imaging at data centers in Cincinnati and Orlando, Intrieve offers payment authorizations for automated teller machine and electronic fund transfers, among other things.
"It clearly puts us in the market with broader capabilities for payment processing," Mr. O'Malley said.
Harland will probably need such capabilities to go up against larger rivals. The "big four" in core processing - Fiserv Inc. of Brookfield, Wis.; Fidelity National Financial Inc. of Jacksonville, Fla.; Metavante Corp., the technology subsidiary of the Milwaukee banking company Marshall & Ilsley Corp.; and Jack Henry & Associates Inc. of Monett, Mo. - have been bulking up in the past two years by acquiring smaller providers.
M. Arthur Gillis, the president of Computer Based Solutions Inc., a Dallas research and consulting firm, said Harland is a good fit for Intrieve.
"Intrieve is basically a cooperative," Mr. Gillis said. "It's owned by its customers" and focuses on service. "Harland is a sweet and sensitive company. They don't have the go-go aggressiveness that a Fiserv or Fidelity has."
A report Mr. Gillis published last year ranks Harland sixth by revenue among core processors, at $200 million, and Intrieve ninth, at $55 million. The combination would move Harland to fifth, ahead of Bisys, which has $220 million of core processing revenue. Mr. Gillis said his figures exclude nonbank revenue; more than half of Bisys' revenue comes from outsourced processing for mutual funds.
A spokesman for Intrieve would not discuss the deal, citing uncertainties around the shareholder vote.
